Vietnam - Vietnam growth target not being lowered despite difficult economic conditions

Vietnam's economic growth reached 4 percent in the first quarter (Q1) of 2012, the lowest over the past two years, yet the National Assembly Economic Committee has not by far unveiled any intention to lower the growth target.

The government's report at the 7th meeting session of the National Assembly Standing Committee revealed difficult economic condition in the first three months. Despite some relaxation, interest rates have still been relatively high hampering businesses' capital absorption.

Also, industrial production has slowed down and consumption has shrunken further.

Economic growth gained merely 4 percent for the first quarter, which is lower than the year-on-year rate and that of the fourth quarter of 2011.

In addition, the National Assembly Economic Committee admitted GDP lowest growth rate in the first quarter over the past two years, much lower than the government's goal of 5-6 percent (the year target of 6-6.5 percent).

However, the committee together with the government has agreed not to make any amendment to the economic growth targets for the time being. Also, the agency demanded the government to report to the National Assembly the growth plans as well as implementation measures for better adaption to the market fluctuations.

The three beginning months of the year witnessed some encouraging economic results such as stabilised average interbank foreign exchange, increased export volume, stable agricultural production and slower CPI growth rate.

Nonetheless, low CPI growth rate has implied the subsequent implications of economic difficulties in the previous year particularly weaker aggregate demand.

Some delegates reckoned further pressures on price hikes of several commodities since quarter 2 this year. Inflation rate is forecast at 6-7 percent the whole year, according to economic experts. Yet, the Ministry of Planning and Investment assumed the rate should hover between 8 percent 0and 9 percent. In the meantime, Nguyen Van Giau, chair of the National Assembly Economic Committee suggested the rate of 10 percent as low inflation rate could very much hurt GDP growth.

Earlier, in a report submitted to the government in late March, the National Financial Supervisory Committee highlighted several major economic achievements in the first quarter of the year including low inflation rate, stable foreign exchange rate, improved banking system's and stock market's liquidity and ratings agencies' pessimistic forecast for the local economy.

Yet, modest credit growth of 2.13 percent in Q1 and the likely failure to meet the goal of 15-17 percent for the whole year may, therefore, make the given economic growth rate of 5.5-5.8 percent a tough task, predicted this committee.

The Asian Development Bank anticipated Vietnam's economic growth to reach 5.7 percent for this year and 6.2 percent for the following year in their report on Asian economic prospect released on 11 April.

VietBiz24

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